Fiscal Crisis Could Kill 400,000 Jobs

The nation's labor market would lose more than 400,000 jobs in 2013 if President Barack Obama and Congress fail to reach an agreement preventing unemployment-benefit extensions from expiring, reports the Economic Policy Institute, a Washington, D.C.-based think tank. Federally funded unemployment benefits are scheduled to expire in December 2012.

Exhaustion of the benefits would have a devastating effect on unemployed African-American workers because they suffer from the highest jobless rate among all major worker groups, which include whites, Asians and Hispanics.

In October, the jobless rate for black men 20 years old and older was 14.1 percent, down slightly from 14.2 percent in September. The unemployment rate for black women in October was 12.4 percent, compared with 10.9 percent in September, according to the U.S. Bureau of Labor Statistics.

An analysis by EPI President Lawrence Mishel and labor-market economist Heidi Shierholz found that continuing unemployment extensions through 2013 would not only give critical assistance to many of the 5 million workers who have been unemployed for more than six months, it would generate spending to support 400,000 jobs.

"Unemployed workers are very likely to spend their unemployment benefits on rent, groceries and other necessities, thus increasing economic activity," Mishel and Shierholz said. "This economic activity saves and creates jobs throughout the economy. In fact, economists, including those at the Congressional Budget Office widely recognize government spending on unemployment insurance benefits as one of the most-effective measures that can be taken during an economic downturn to generate jobs. If the federal government spent $30 billion on unemployment insurance benefits in 2013, the Gross Domestic Product would grow by an estimated $48 billion, translating into roughly 400,000 jobs."

Shierholz added some grim news.

"The ratio of unemployed workers to jobs opening has been 3-to-1 or greater since September 2008," she added. "For two out of three workers, there are no jobs available. In other words, the vast majority of the unemployed are not going to be able to find a job no matter what they do."